The best reward and cashback credit cards revealedHow to make your Christmas shopping pay
21 November 2014
Reward and cashback credit cards give you something back each time you spend on them.
But they aren't suitable for everyone, and there can be big differences in how much they pay out.
Here we look at the most generous cashback and reward credit cards and what to bear in mind before taking one out.
Go further: Which? Credit card comparison tables - compare the best deals on the market
Best reward credit cards
The key to picking the right reward credit card is where you do your shopping and how much the rewards are worth. Most credit cards with a reward scheme offer more points when you spend at the associated stores, so to get the best from these deals you’ll need to spend regularly in a particular shop.
House of Fraser and Debenhams offer the most generous in-store rate on their credit cards - the equivalent of 3%. But spending elsewhere will only earn the equivalent of 1% and 0.5% respectively. Based on a monthly spend of £500 (one third spent in store), you'd earn annual rewards worth £110 from House of Fraser, and £85 from Debenhams.
Lloyds Bank Choice Rewards Amex pays the equivalent of 1.5% on all spending, but you get double points in the first six months. You can redeem points for retailer vouchers, cashback or Avios rewards. If you spend £500 a month, you'd get £111 in rewards in the first year, after the £24 annual fee.
The Nectar credit card from American Express pays the equivalent of 2% on spending in Sainbury's and with Nectar partners, and 1% elsewhere. Based on a monthly spend of £500 (one third spent in store), you'd get rewards worth £80 in the first year.
You'll also receive 20,000 bonus points - worth £100 - to spend with Nectar partners if you spend £2,000 in the first three months.
If you’re not loyal to a particular store chain or don’t want your rewards in vouchers, you may be better off with a cashback credit card.
Go further: Best reward credit cards - all available deals compared
Best cashback credit cards
Cashback cards pay you tax-free cash, which is usually credited to your account once a year.
The Platinum Cashback card from American Express offers the most generous cashback rate on the market, paying 5% for the first three months (capped at £125) and 1.25% on all subsequent purchases. If you spend £500 a month, you'd get £106 in the first year, after the £25 annual fee.
The Everyday Cashback card from American Express is the best fee-free cashback card available. It pays 5% for the first three months (capped at £100) and then up to 1.25% depending on how much you spend.
Santander's 123 credit card pays 3% cashback at petrol stations and on National Rail and Transport for London travel, on combined spending of up to £300 (maximum £9 cashback each month). You'll also get 1% cashback at selected supermarkets and 2% at selected department stores.
Even if you used the card to pay for fuel and train travel alone, by spending £300 a month you'd get £84 a year after the £24 annual fee.
Go further: Best cashback credit cards - all available deals compared
What's the catch?
Cashback and reward cards are only worth considering if you pay off your credit card in full each month, otherwise the interest you're charged will outweigh any rewards.
You'll also need a good credit rating for your application to be successful. Bear in mind that most cashback and reward card providers include a minimum income as part of their eligibility criteria and some charge an annual fee.